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INVENTORY FINANCING
If you’re a small business owner looking to acquire inventory for your company, but don’t have the revenue or funds to do so, you should consider inventory financing.
This short-term funding option is a great and worthwhile option for small business owners, especially ones that own product-based businesses.
Let’s look at the pros and cons of inventory financing and how lenders, like Yardline, can help.
WHAT IS INVENTORY FINANCING
Inventory financing allows businesses to obtain the money needed to buy inventory.
This short-term, small-business loan allows lenders to provide capital, typically a percentage of the inventory’s value, so that businesses can purchase products to sell. The products bought serve as collateral on the financing meaning business owners don’t have to supply personal or other business assets to obtain financing.
In most cases, business owners use inventory financing and inventory loans to purchase new inventory. However, it can also be used for businesses that have specific inventory purchases and need to either leverage the stock to free up cash flow or need financing to complete the manufacturing process.
PROS AND CONS OF INVENTORY FINANCING
Pros
Quick funding - Businesses will typically get the money from inventory loans within a few business days.
Lenient requirements - Newer businesses and those without excellent credit can still qualify for inventory financing. The application process is easy, especially if inventory records are organized. Business owners also don’t have to rely on their business or personal credit ratings or history because the loans are secured by the inventory.
Inventory can be used as collateral - Lenders will typically not require other business or personal assets as collateral, making it less risky for the business owner. Keep in mind, that if you are unable to make the payments, the lender can seize the inventory you haven’t sold to pay back the remaining balance you owe on the loan.
Cons
Added fees - Inventory financing can come with additional fees, like appraisal fees, origination fees, and prepayment penalties.Minimum loan amount may be required - Some lenders may have a specific minimum loan amount in order for owners to get approval and borrow capital. This can lead to delays and shortfalls on the side of the business owner.
High-Interest rates - While they are easy to qualify for, inventory loans can come with higher interest rates than other financing options. When determining interest rates, lenders still take into account the owner’s credit score, time in business, and if you are or are not using other assets to secure the loan.
Check-ins and due diligence - Lenders may require check-ins from third-party auditors to monitor inventory levels and sales. Additionally, business owners may be required to determine the inventory’s liquidation value, which can also be time-consuming and costly.
IS INVENTORY FINANCING RIGHT FOR YOU?
Inventory financing is a great way to secure financing, especially if you are a new small business. It’s also a great option for businesses in the retail, wholesale, and manufacturing industries.
Consider inventory loans if you need to:
Purchase inventory to prepare for busy seasonsCover short-term cash flow gaps
Buy additional inventory to meet customer demand
Update product offerings and launch new products
Purchase products in bulk at discounted prices
HOW TO APPLY FOR INVENTORY FINANCING?
The process for inventory loans for small businesses is relatively simple, easy, and straightforward.
First, compare lenders and banks who offer these loans to purchase inventory. Look at the funding time, repayment terms, and interest rates. Online lenders typically have faster turnaround times for approval and funding.
Yardline, for example, offers the best rates and terms to meet your business funding needs in as fast as 24 hours. Funding is available as new inventory is ordered and applicants can expect rates from 1-2% per month.
Next, you’ll need to gather all the required documentation. This can include business and personal tax returns, bank statements, inventory lists, balance sheets, profit and loss statements, future sales predictions, etc.
Lastly, it’s time to apply for the loan and once approved, funds can be received within days, depending on the lender. And, if you are not approved, there are plenty of other funding options available.
Our one, simple application provides applicants access to a suite of funding solutions, including inventory financing, small business loans, business and personal credit cards, revolving lines of credit, SBA loans, and so much more. Plus, our team will walk you through your options and get you the funding you qualify for (from $5k to $20 million).
Apply for funding with Yardline today.
